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Certiorari Granted, No. 31,416, January 6, 2009

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number: 2009-NMCA-005

Filing Date: October 30, 2008

Docket No. 27,922

CARLSBAD HOTEL ASSOCIATES, L.L.C.,

Plaintiff-Appellee,

v.

PATTERSON-UTI DRILLING COMPANY,

L.P., L.L.L.P.,

Defendant-Appellant,

and

CHI OPERATING, INC.,

Defendant.

APPEAL FROM THE DISTRICT COURT OF EDDY COUNTY

Jane Shuler Gray, District Judge

McCormick, Caraway & Tabor, L.L.P.

John M. Caraway

Carlsbad, NM

for Appellee

Hatch, Allen & Shepherd, P.A.

Donna L. Chapman-Brown

Amy M. Cardwell

Albuquerque, NM

for Appellant
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OPINION

SUTIN, Chief Judge.

{1} The Fifth Judicial District Court provided an opportunity to the parties to engage in

a court-sponsored settlement conference pursuant to a local settlement conference rule.

Once the parties agreed to participate, they became subject to both the local rule and to a

court order, which both required good faith participation. Defendant Patterson-UTI Drilling

Company, LP, LLLP (Patterson) determined in advance of the settlement conference that it

had no liability and entered the settlement conference with no intention of settling. At the

conference, Patterson offered an amount only under the threat of sanction. The district court

judge presiding in the case, referred to hereafter as “the district court,” sanctioned Patterson

for bad faith participation, based on (1) Patterson’s failure in advance of the settlement

conference to notify Plaintiff Carlsbad Hotel Associates, L.L.C. (the Hotel) and a coDefendant, Chi Operating, Inc. (Chi), that it had determined that it had no liability and did

not intend to make any offer to settle; (2) Patterson’s failure to make an offer except upon

threat of court sanction by the facilitator; and (3) Patterson’s failure to further compromise

from the offer it made under threat of sanction. This case requires us to consider the

propriety of the sanction imposed against Patterson for violation of the local rule and the

court order. Although we express some concerns about the requirement of good faith in

general in the mediation context and its meaning in particular in the same context, we affirm

the sanction because the order to which Patterson agreed defined good faith in a manner

pursuant to which the district court could have properly found that Patterson was in

violation.

INTRODUCTION

{2} Several insightful articles in the last several years have addressed the propriety of

court rules requiring good faith participation in court-affiliated mediations and settlement

conferences and the propriety of allowing courts to sanction participants for the failure to

negotiate in good faith. In the eyes of several practitioners and academics, the application

of a good faith requirement and the imposition of sanctions can be overly problematic. See

James J. Alfini et al., Mediation Theory and Practice 287-314 (Matthew Bender & Co., Inc.

ed., 2d ed. 2006); Carrie Menkel-Meadow et al., Mediation: Practice, Policy, and Ethics

301-11 (2006); Stephen J. Ware, Principles of Alternative Dispute Resolution § 4.30, at 335-

37 (2d ed. 2001); Roger L. Carter, Oh, Ye of Little (Good) Faith: Questions, Concerns and

Commentary on Efforts to Regulate Participant Conduct in Mediations, 2002 J. Disp. Resol.

367; Carol L. Izumi & Homer C. La Rue, Prohibiting “Good Faith” Reports Under the

Uniform Mediation Act: Keeping the Adjudication Camel Out of the Mediation Tent, 2003

J. Disp. Resol. 67; John Lande, Using Dispute System Design Methods to Promote GoodFaith Participation in Court-Connected Mediation Programs, 50 UCLA L. Rev. 69 (2002);

ABA Sec. of Disp. Resol., Resolution on Good Faith Requirements for Mediators and

Mediation Advocates in Court-Mandated Mediation Programs (Aug. 7, 2004),

http://www.abanet.org/dispute/draftres2.doc (listing articles on the subject).
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{3} As indicated by one effective writer on the subject, “[r]ules . . . that permit courts to

sanction a wide range of subjective behavior create a grave risk of undermining core values

of mediation and creating unintended problems.” John Lande, Why a Good-Faith

Requirement Is a Bad Idea for Mediation, 23 Alternatives to High Cost Litig. 1, 9 (2005).

A resolution of the American Bar Association Section of Dispute Resolution advocates

examination and revision of rules authorizing sanctions for bad faith conduct in courtmandated mediation programs in order “to preserve the core values of the mediation process,

namely, party self-determination, mediator impartiality, and mediation confidentiality.”

ABA, supra.

{4} Competing views exist as to the benefit or detriment of a good faith participation

requirement in court-affiliated mediations and settlement conferences, even in those with

which the parties have voluntarily agreed. There are several policies favoring a good faith

participation requirement. “The call for good-faith in mediation is premised on the need to

ensure that the court-ordered process is not a waste of time, that it is at least possible to

achieve a collaborative resolution, and that mediation is not misused. Furthermore, some

suggest that to the extent that courts order participation and parties devote resources to it,

society should protect the integrity of the process.” Menkel-Meadow, supra, at 301; see also

Lande, supra, 50 UCLA L. Rev. at 74 (pointing out the views that courts want to ensure that

the time and money spent for mediation are well spent and that stakeholders also want to

ensure maintenance of the integrity of the court-affiliated mediation programs).

{5} However, there exist a number of concerns about and policies disfavoring a good

faith participation requirement. These are addressed in the articles listed earlier in this

opinion. There are problems defining “good faith” and wrestling with subjectivity, and with

commensurate concerns about adequate notice to the parties for what they can be sanctioned.

In addition, requiring facilitators to report bad faith can compromise their facilitative and

neutral roles and can produce unwanted incursion into confidentiality. Also, the sanction

possibility gives one party a weapon against the other, thus encouraging, if not increasing

adversarial behavior. Furthermore, the enforcement of sanctions creates satellite litigation

resulting in more time and costs, something that mediation is meant to reduce. Also

prominent is an overriding notion of a party’s right to access to the court to have a claim

resolved by a jury, together with the party’s right to control how the case is presented, with

no limitations by coercion or threat of sanction. Finally, because mediations are not on the

record, a party and the facilitator may disagree on what occurred. A hearing to take evidence

on what occurred not only invades confidentiality, it is likely to produce conflicting views

of what occurred in the mediation. This conflict would raise fact and credibility issues

which, in turn, would raise questions whether the facilitator, whose view of what occurred

in mediation would be in play, can in fairness sit in judgment.

{6} In the present case, neither the local rule nor the order discusses whether the

settlement conference was to be conducted in a manner consistent with norms and the

principles of mediation, which require neutrality and impartiality of mediators, strict
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confidentiality, voluntary settlements, and self-determination (that is, the right of the parties

to control whether an offer is made and the amount of any offer). See Izumi, supra, at 80-87;

Alfini, supra, at 298-99, 312 (questioning, in the author’s review of Pitman v. Brinker Int’l,

216 F.R.D. 481 (D. Ariz. 2003), whether different standards should apply to a judicial

settlement conference conducted by a federal magistrate, on the one hand, and a mediation,

on the other). 

{7} Our analysis and determination in this case is driven, however, by the particular

scheme into which the parties chose to enter. In this case, all parties agreed voluntarily to

a settlement conference; consequently the district court issued an order providing for such

a conference, thus bringing the proceeding within the sphere of the court’s local rule on good

faith negotiations. Under these circumstances, it is clear to us that Patterson was bound by

the requirements of the local rule and order and can complain only if it is able to show that

the court erred in the application and enforcement of its local rule and order. We hold that

Patterson has not made that showing and that the court did not err. We also hold that

Patterson cannot complain about the facilitator’s role in acting essentially as a hearing

officer on the question whether sanctions were appropriate.

BACKGROUND

{8} The Hotel sued Patterson and Chi seeking loss of business damages allegedly

resulting from a gas well blowout and subsequent emergency evacuation in Carlsbad, New

Mexico. Patterson and Chi filed cross-claims against each other. At a Rule 1-016 NMRA

scheduling conference in October 2004, the parties agreed to participate in a settlement

conference pursuant to the district court’s local rule LR5-205 NMRA. LR5-205(A) provides

that “[a] settlement conference will be ordered if the trial judge deems it to be appropriate

or after agreement by counsel that such a conference may result in a settlement of some or

all of the issues in the case.” The court ordered the parties to contact another judge in the

same judicial district, Judge Currier, to conduct the settlement conference pursuant to

LR5-205. See LR5-205(A) (“[A] settlement conference may be conducted by a judge of this

district who is not assigned to the case[.]”). Pursuant to LR5-205(C), Judge Currier was

expected “to promote a settlement” and was charged with the responsibility of being “an

active participant in the conference.”

{9} The court thereafter entered an order in which it referred the matter to Judge Currier

for the settlement conference, set the conference for February 2005, required that each party

send to Judge Currier, but not to the opposing party, a letter or memorandum summarizing

the issues and giving an appraisal of the strengths and weaknesses of the positions of all the

parties in the case. The order also required good faith participation, as follows:

All parties shall have settlement authority and shall participate at the

settlement conference in good faith. This means that, absent truly unusual

circumstances, the parties will be expected to compromise from their last

offer. Sanctions may be imposed if a party does not participate in the
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settlement conference in good faith.

LR5-205(B) similarly requires good faith participation:

All parties shall participate at the settlement conference in good faith and

sanctions shall be imposed if the settlement conference judge finds that a

party has not participated in good faith in the settlement conference, and the

trial judge adopts the findings made by the settlement conference judge.

{10} Patterson submitted a “confidential position paper” that included an accountant’s

report indicating that the Hotel’s damages were overvalued and that its damages were

approximately $9140. This report was also given to the parties before the settlement

conference. Patterson represents that it also explained “its position of no liability to Judge

Currier . . . in the confidential mediation position paper.” 

{11} From all appearances, Patterson and the Hotel did not exchange any settlement

offers. Chi, who had already settled with several hundred claimants in other lawsuits or nonlitigation settlements, offered $10,000 before the settlement conference. The Hotel’s

demand at the conference was approximately $32,000, which did not include an amount for

punitive damages. At the settlement conference, Patterson stated that it had no liability and

it made no initial offer. Judge Currier reminded Patterson of the district court’s order and

informed Patterson that he thought it was violating the order by not participating in the

process in good faith. Based on Judge Currier’s own assessment of Patterson’s risk, Judge

Currier insisted that Patterson make an offer and reminded it again of bad faith. After a

threat of sanctions, Patterson offered $1000 toward settlement. Judge Currier informed

Patterson that he did not believe $1000 would satisfy its duty to participate in good faith.

Patterson represented that if the other parties were close to settlement, refusing to specify

what it meant by “close,” it might be willing to contribute enough to settle the case. After

consulting with Chi and to follow up on Patterson’s representation, Judge Currier asked

Patterson if it would be willing to pay $5000 to get the case settled. The Patterson

representative indicated that he would do so if Judge Currier could guarantee that the $5000

would produce a settlement. Judge Currier would not make the guarantee, but he indicated

that he was confident the case would settle with an additional $5000 from Patterson.

Nonetheless, Patterson made no further offers, and the settlement conference ended without

reaching a settlement after about five hours of mediation.

{12} After the conference, Judge Currier submitted a sealed, written report of findings to

the district court that indicated Patterson had refused to participate in the settlement

conference in good faith. In addition, the Hotel and Chi moved for sanctions against

Patterson and asked for reimbursement for the costs of their representatives to attend the

conference and for attorney fees.

{13} After reviewing the matter, the district court instructed Judge Currier to conduct a

hearing to determine the good faith issue under the local rule and the court’s order and to
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enter sanctions if appropriate. Patterson then filed a motion requesting that Judge Currier

be recused from hearing the pending motions for sanctions (1) because in his role as

mediator he had recommended sanctions, (2) because he had personal knowledge of the

disputed evidentiary facts concerning the mediation, and (3) because he was a material

witness whose testimony may have been required for the hearing on the motions for

sanctions. The district court denied Patterson’s motion, and Judge Currier heard the motions

for sanctions on July 1, 2005. 

{14} At the outset of the hearing on the motions, when asked by Patterson in what capacity

he was acting, Judge Currier explained that he had acted in the matter as a mediator but in

conducting the hearing on the issue of bad faith he was acting as a judge, comparing the

process to that of a judge who is deciding an issue of direct contempt. Judge Currier pointed

out, too, that Patterson offered $1000 only after he had told Patterson’s representative that

he would be held in contempt if Patterson did not make an offer. Further, Judge Currier

stated that he “consider[ed] $1000 to be merely a token.” Judge Currier reaffirmed the

conclusions he had reached during the settlement conference, namely:

1. Patterson agreed to mediate and knew the contents of the court order

four months prior to the mediation.

2. Patterson came unwilling and unprepared to settle, short of an

unconditional dismissal.

3. [The Patterson representative] was not a person with full settlement

authority and demonstrated a level of disregard if not arrogance for the

mediation process that I have not previously witnessed. The conduct of [the

Patterson representative] and Patterson also showed disrespect for the other

participants.

4. [The Patterson representative] was warned on at least three occasions

that Patterson was not participating in the mediation process in good faith.

{15} At the end of the sanctions hearing, Judge Currier indicated that the problem he saw

with Patterson’s conduct was that Patterson had determined by early November 2004 that

it had no liability and that it did not intend to offer any money, but waited until the

settlement conference to disclose this position to the other parties. Judge Currier stated that

he believed Patterson was using the settlement conference merely for the purpose of

discovery “to find out what it was that the other side had that they could point a finger at in

regard to Patterson.”

{16} After the hearing on the motions for sanctions, Judge Currier entered an order

indicating that “the [c]ourt [had] read its findings into the record regarding the mediation”

and stating that Patterson had “conducted itself in bad faith at the mediation.” Afterward,

Judge Currier entered a supplemental order that required Patterson to pay the Hotel
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$5,156.67, which represented attorney fees and the wages of the employees who attended

the conference, as a sanction for participating in the settlement conference in bad faith.

Patterson appealed that order. Judge Currier also ordered that Patterson pay sanctions to

Chi; however, those sanctions are not before us on appeal.

{17} While Patterson’s appeal was on this Court’s summary calendar (proposing dismissal

for lack of a final order), the case settled with Chi paying $17,500 and Patterson paying

$1000. Before settling, however, the Hotel filed a motion requesting the district court to

adopt the findings and decision by Judge Currier and thereby to impose the sanctions in

Judge Currier’s order against Patterson. The district court heard argument on the sanctions;

listened to the record made at the hearing conducted by Judge Currier on July 1, 2005, which

included Judge Currier’s view of what occurred at the settlement conference, the Patterson

representative’s testimony, and statements of counsel; and ultimately agreed with Judge

Currier.

{18} The district court entered an order adopting the findings and the decision of Judge

Currier. The court stated that settlement conferences were not mandated, that they were

instead “offered as essentially a service in efforts to facilitate settlement,” and that “[n]o one

has a ‘gun to their head’ requiring that any party agree to participate.” The court further

indicated that “when a settlement conference is agreeable to the parties, time, effort and

attorney[] fees are necessarily expended in a good faith hope that settlement may be had.

All that is required of any party is good faith.” The court then stated:

8. . . . [Judge] Currier found that Patterson determined from at

least early November 2004 that it had no liability. And, in agreeing to

participate in a settlement conference, Patterson did not disclose to the other

parties that it intended to offer no monies whatsoever in settlement.

Therefore, from fall of 2004 through early February Patterson allowed the

other litigants to expect and believe that settlement by Patterson was at least

a possibility.

9. [Judge] Currier further stated . . . that Patterson used the

settlement process merely for discovery: “to find out what it was that the

other side had that they could point a finger at in regard to Patterson.” 

. . . .

11. [Judge] Currier noted that it would have been entirely

reasonable for Patterson to express that it had nothing to offer based on [its]

belief of no liability. Such would have been entirely within Patterson’s

right–and ultimately, it was Patterson’s obligation to do so. 

12. Patterson argues that to impose sanctions would have a

chilling effect on the settlement process, arguing that [Judge] Currier was
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trying to impose a judicially determined amount for purposes of settlement.

. . .

13. However, Patterson entirely misses the point with regard to

the reason for imposition of sanctions. . . . Patterson put all parties through

an exercise in futility by virtue of agreeing to such a conference. The amount

of money–the $1,000–was extracted only after threat by [Judge] Currier to

impose sanctions.

Based on these and other findings of fact, and after adopting Judge Currier’s findings and

decision “in full,” the district court ordered that Patterson immediately pay the Hotel the

sanctions recommended by Judge Currier.

{19} Patterson appeals the supplemental order of Judge Currier and the district court’s

order that required it to pay sanctions. First, Patterson contends that the court erred because

“[failure] to offer a judicially determined settlement amount does not constitute bad faith

warranting the imposition of sanctions.” Second, Patterson contends that it was improper

for Judge Currier, as mediator, to preside as a judge at the hearing on the motions for

sanctions.

DISCUSSION

Sanctions

Standard of Review

{20} There are no New Mexico cases addressing the imposition of sanctions for bad faith

participation in a settlement conference or mediation. The parties to this appeal agree that

we review whether the district court properly sanctioned Patterson by using the abuse of

discretion standard. Patterson likens the issue to the review of the imposition of Rule 1-011

NMRA sanctions, as in Rangel v. Save Mart, Inc., 2006-NMCA-120, ¶ 12, 140 N.M. 395,

142 P.3d 983. Similarly, the Hotel compares the sanctions in this case to the imposition of

discovery sanctions under Rule 1-037 NMRA, as in Gonzales v. Surgidev Corp., 120 N.M.

151, 156-58, 899 P.2d 594, 599-601 (1995).

{21} An abuse of discretion occurs “when the court’s decision is without logic or reason,

or . . . clearly unable to be defended.” Id. at 157, 899 P.2d at 600 (alteration in original)

(internal quotation marks and citation omitted). A district court abuses its discretion if its

ruling is based on an erroneous view of the law. Rangel, 2006-NMCA-120, ¶ 12. “It is not

the function of a reviewing court to substitute its own interpretation of a local rule for that

of the court which promulgated the rule.” James v. Brumlop, 94 N.M. 291, 295, 609 P.2d

1247, 1251 (Ct. App.1980).

The Sanctions Were Not an Abuse of Discretion
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{22} Patterson argues that the district court erred by construing the good faith requirement

to require Patterson “to accept a judicially predetermined amount for settlement, in excess

of the amount Patterson believed to be the settlement value of [the] case.” Patterson relies

on federal case law to support its position, particularly the case of Dawson v. United States,

68 F.3d 886, 887 (5th Cir. 1995), which overturned sanctions for failing to offer to settle

pursuant to a local rule requiring a “good-faith effort to settle.” In support of the sanctions,

the Hotel refers to sanctions available under the inherent power of the court to control its

docket, see, e.g., Gonzales, 120 N.M. at 154-55, 157, 899 P.2d at 597-98, 600, as well as to

Rule 1-016(F) NMRA which governs sanctions related to pretrial conferences. See LR5-

205(A) (stating that under Rule 1-016 “a settlement conference may be conducted by a judge

of this district”).

{23} The extraction of coerced settlement offers through threat of sanctions can be

acceptable, if at all, only in extremely limited circumstances. The present case puts this

principle to the test. We believe that, under the specific circumstances of this case, the

decisions of Judge Currier and the district court may stand. It is the specific circumstances

in this case that set this case apart from Dawson and other cases that disfavor sanctions

imposed for lack of good faith participation. Contrary to the implication in the dissenting

opinion, this case is not about a judicially predetermined settlement amount, which is

Patterson’s sole position on appeal. It is also not about a party that came to a settlement

prepared to compromise in any voluntary way; the court below found on the basis of the

facts before it that Patterson made its first offer only under threat of sanction. The

conclusions in the dissenting opinion therefore appear to us to be refinding the facts,

something an appellate court should not do. See, e.g., Blaze Constr. Co., Inc. v. Taxation &

Revenue Dep’t, 118 N.M. 647, 653, 884 P.2d 803, 809 (1994); Clayton v. Trotter, 110 N.M.

369, 371, 796 P.2d 262, 264 (Ct. App. 1990). Instead, this is a case about a party who had

no intention of ever settling, who put the parties and the court through the expense of a futile

settlement facilitation, and who would only offer a token amount after a warning and threat

of sanctions. 

{24} Here, the settlement conference was not mandated. The parties expressly agreed to

participate in a settlement conference and to do so in good faith. They understood that the

conference was governed by the express good faith requirement in LR5-205(B) and in the

court order for the settlement conference. The rule and the order required not only good

faith participation, but the order explicitly informed the participants that “absent truly

unusual circumstances” they were “expected to compromise from their last offer.”

Furthermore, they knew that another district court judge would act as the facilitator who was

not only “expected to promote a settlement” but was affirmatively charged with the

responsibility of being “an active participant in the conference.” LR5-205(C). The district

court carried the power to sanction by rule and by court order, as well as by its inherent

power.

{25} At the same time, Patterson was a sophisticated participant and should have been

aware based on the language of the rule and the order that it was entering into a settlement
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conference with the possibility, if not likelihood, that it would be required to make a bona

fide effort to reach a compromise. Further, Patterson should have been aware that the

facilitator would engage in an evaluative process and press Patterson to make an offer that

the facilitator would believe was made in a good faith effort to compromise. The ambiguity,

lack of restricted and definite meaning, and subjective nature of the words “good faith” and

“compromise from the last offer” can be no defense to Patterson in this case because

Patterson has not raised those questionable characteristics of the rule or the order as a basis

of error or for reversal. In fact, Patterson raises no issue of lack of fair or reasonable notice

of what conduct was sanctionable, and Patterson nowhere argues that it was not given

reasonable or fair notice that its conduct in this case would be subject to sanctions.

{26} While we question the wisdom of placing in a settlement conference rule or order a

good faith requirement or a requirement that a party compromise from the last offer, we see

no basis on which to hold that the court erred in requiring Patterson upon threat of sanction

to make an initial offer. We also see no basis on which to hold that the court erred in

sanctioning Patterson for coming into the conference with no intent to make any offer and

then for refusing to compromise further after making the initial offer. With LR5-205 in

place and the court’s order agreed to, we cannot say that Judge Currier or the district court

acted arbitrarily, capriciously, against reason or logic, or under an erroneous view of the law.

Judge Currier and the district court acted within the parameters of the rule and the order.

Patterson does not argue that any particular constitutional or statutory provision or any other

law was violated by Judge Currier or the district court in considering the good faith of

Patterson. Patterson, in our view, agreed to the rules of the game established in the local rule

and the court order, and we cannot say that the district court abused its discretion in ruling

that Patterson did not act in good faith and was subject to sanctions.

Judge Currier Could Entertain the Motions for Sanctions

{27} Patterson argues that it was improper for Judge Currier to preside as judge at the

hearing on the Hotel’s motion for sanctions. Patterson takes the standard of review to be that

of abuse of discretion. We see the issue to be whether the district court abused its discretion

in selecting Judge Currier to consider whether sanctions were appropriate. As indicated

earlier in this opinion, an abuse of discretion occurs when the court’s decision is without

logic or reason, is clearly unable to be defended, or is based on an erroneous view of the law.

See Gonzales, 120 N.M. at 157, 899 P.2d at 600; Rangel, 2006-NMCA-120, ¶ 12. 

{28} The settlement conference was to be confidential and is not of record on appeal

except to the extent of recollections of what occurred as recounted in the July 1, 2005,

hearing. Thus, confidentiality was arguably breached in the hearing and then when Judge

Currier reported what occurred in the settlement conference to the district court. Further,

although the July 1, 2005, hearing was sequestered and sealed “except as to the Appellate

Courts and counsel for Patterson,” the briefs of both parties cite portions of the hearing, and

the Hotel cites portions of the hearing from which it was excluded; the Hotel thus apparently

has had access to the record of the hearing. Because the case has settled and the parties both
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cite the hearing, we conclude that the parties have waived settlement conference

confidentiality.

{29} It is fair to question the wisdom, if not the fairness, of having a mediator or

settlement facilitator also sit as a district court judge in ultimate judgment of credibility,

factual disputes, and law on the issues of good faith and sanctions. We do not, however, see

the need to address this concern in this case. We construe the district court’s assignment of

Judge Currier to hold a hearing on the motions for sanctions to be an assignment to act

essentially as a hearing officer. Although the tenor of Judge Currier’s rulings took on an air

of judicial finality, his rulings were treated by the district court as recommendations. The

district court conducted its own, independent review of the proceedings and came to its own

independent conclusions in regard to the circumstances and the justification for sanctions.

Because the final analysis and decision on sanctions were made by the district court, we

reject Patterson’s arguments that allowing the process “would fly in the face” of Rule 1-

088.1(D) NMRA and Rule 21-400(A)(1), (3), (4), and (6)(a) NMRA, relating to district

judge recusal when a judge’s impartiality is in question. Nor do we see a due process

violation under the New Mexico Constitution, article II, section 18 as is also argued by

Patterson. Furthermore we maintain our view that Patterson agreed to and was bound by the

process contemplated under the local rule and the court order. 

{30} In conclusion, while we think that the process employed here, of utilizing the

facilitator as a hearing officer on the issue of good faith, is somewhat troubling, we cannot

say that the district court abused its discretion in permitting Judge Currier to hear the

motions for sanctions when, in the final analysis, the district court conducted its own fullrecord review and independently concluded that sanctions were appropriate.

The Mediation Procedures Act

{31} While it does not control the outcome of this case, we note that subsequent to the

settlement conference in this case the New Mexico State Legislature passed the Mediation

Procedures Act (the Act), NMSA 1978, §§ 44-7B-1 to -6 (2007). This Act governs

“mediation[s] in which . . . the mediation parties are required to mediate by statute or court

or administrative agency rule or are referred to mediation by a court, administrative agency

or arbitrator[.]” Section 44-7B-3(A)(1). The Act also covers circumstances where the

parties and mediator agree to mediate as long as the agreement “is evidenced by a record that

is signed by the mediation parties.” Section 44-7B-3(A)(2). The Act nowhere requires good

faith participation or provides for sanctions for failing to act in good faith. See §§ 44-7B-1

to -6. Further, the Act contains the following confidentiality provision: “Except as

otherwise provided in the [Act] or by applicable judicial court rules, all mediation

communications are confidential, and not subject to disclosure and shall not be used as

evidence in any proceeding.” Section 44-7B-4. While the Act contains exceptions to the

confidentiality provision, there is no exception for use to determine whether a party

participated in the mediation in good faith. See § 44-7B-5. We offer no view here as to

whether the scope of the Act is intended to include rules such as LR5-205 or orders such as
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that entered in the present case.

CONCLUSION

{32} We affirm the district court’s sanctions against Patterson. The parties will bear their

own attorney fees and costs on appeal. We wish to emphasize that we affirm because we see

no constitutional, statutory, common law, or equity basis on which to reverse. We

respectfully hope that the Fifth Judicial District Court, as well as other district courts

throughout the State that have a good faith requirement similar to or the same as that of the

Fifth Judicial District Court, consider the elimination of the good faith requirement in their

court-facilitated settlement programs. We also respectfully suggest that, under its rulemaking and rule-approval authority and its power of superintending control, as well as its

authority to decide procedural matters based on policy considerations, our Supreme Court

disapprove any future rules containing a good faith requirement and enter an order requiring

existing rules to delete that requirement. 

{33} IT IS SO ORDERED.

JONATHAN B. SUTIN, Chief Judge

I CONCUR:

LYNN PICKARD, Judge

RODERICK T. KENNEDY, Judge (dissenting).

KENNEDY, Judge (dissenting).

{34} “Buy the ticket, take the ride.” The majority affirm by resting on the facts that not

only did Patterson agree to this seriously flawed process but later failed to make arguments

that might have been persuasive, if not dispositive, in its favor. Patterson having thus

acquiesced in its own demise, the majority feel compelled to affirm the sanctions entered

against Patterson. The district court found that Patterson argued that imposing sanctions

would chill the settlement process and that Judge Currier “was trying to impose a judicially

determined amount for purposes of settlement.” I believe that this is the nub of this case, and

I disagree with the majority’s direction—that there is no abuse of discretion in sanctioning

a litigant for having no intention to settle a case where the judicial settlement facilitator finds

the offers that are ultimately made at his insistence to be unacceptable.

{35} I concur in the majority’s invitation to the Supreme Court and the district courts to

re-evaluate this rule and similar rules promoting such coercive use of “settlement
1

 The majority opinion’s Introduction more than adequately notes the underlying attributes

of mediation against which this process cannot measure up.

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conferences.” Mediation as contemplated by New Mexico’s new Mediation Procedures Act

is an important tool. However, I believe that the district court’s and majority’s use of the

term “mediation” is inappropriate in describing anything that happened in this case.1

 I

therefore refer to the “settlement conference” or “conference.” The problem with the

procedure in this case is that it is not mediation, it is not arbitration, but it imposes

requirements on the parties in excess of the former without enforcing the procedural

conditions of the latter. Perhaps the local rule provides for consistency, but in this case,

imposing the requirement to compromise was an invitation to judicial overreaching. The

threat of sanction if a party does not compromise further when the facilitating judge demands

it steps outside of both the local rule and acceptable legal norms.

{36} It is true that Patterson had the order defining “good faith” in its possession for some

months prior to the settlement conference. Patterson did not object that the order went

beyond the local rule’s mentioning of “good faith” to defining good faith as acceptance of

forced settlement regardless of the merits of Patterson’s position. Patterson did not complain

that as the order was written “good faith” was to be a thoroughly subjective evaluation by

the settlement facilitator that would leave Patterson bereft of any meaningful notice as to

what behavior on its part might trigger sanctions. The majority imply that due to the order,

Patterson knew a failure to “compromise” its previous position of “no liability” would be

regarded as not participating in good faith. The majority should not rest their case on

Patterson’s “intent” not to settle being sanctionable when, as described below, Patterson

compromised its intent, whatever it was , with two settlement offers. 

{37} It was clear under the local rule that Judge Currier would be an “active participant”

who would “promote a settlement” as in previous conferences he had conducted. The

majority state that the standard of conduct might have been ambiguous but that Patterson did

not raise ambiguity as an argument. I believe that the standard of conduct required by the

local rule and order was not ambiguous, that Patterson complied sufficiently to satisfy the

order’s requirement to “compromise,” and that the facilitator’s arbitrary conduct exceeded

the scope and powers conferred by the rule, resulting in an abuse of discretion—the

sanctioning of Patterson. I therefore dissent.

The Rule and the Order Are Not Ambiguous

{38} I disagree that the language “compromise from the last offer” in the order is at all

ambiguous, subjective, or lacking in restrictive meaning. The language is quite clear. The

order also gave notice of what would be subject to sanctions: failing to “compromise from

[a party’s] last offer.” Relying, as the facilitator and district court did, on Patterson’s lacking

the intent to make an offer from the initial days of the case through the start of the

conference says nothing about its good faith because, as Patterson underscores, it made an
14

offer. Patterson compromised “from [its] last offer” upon offering $1000 at the settlement

conference. When asked for yet more money, again under threat of the facilitator’s contempt

power, Patterson agreed to $5000 but conditioned its agreement on the sum being sufficient

to settle the case. Thus, “bad faith” became part and parcel of a $4000 disagreement

between the facilitator and Patterson once the facilitator unilaterally rejected Patterson’s

$1000 and insisted on a larger sum.

{39} The facilitator’s statement in the later hearing when he reviewed his order of

sanctions for bad faith was that offering $1000 “is tantamount to offering nothing. The court

determines this to be bad faith[.]” However, $1000 is not “nothing,” and Patterson argued

below that having made the offer satisfied its obligation to compromise. Neither the local

rule nor the order cloak the facilitator’s idea of a proper amount with validity or even

presumptive reasonableness, nor does either require any party to accept the facilitator’s

evaluation of the case’s merits. The majority say that Patterson was obligated to play by “the

rules of the game.” That proposition should apply equally to the court that issued the order

and to the facilitator who both knew of Patterson’s pre-conference position prior to the

conference and was empowered by the order setting the terms of the conference. Contrary

to the majority’s position, Patterson had no obligation to change its intent before the

conference. The order imposed the obligation to compromise on the parties for purposes of

the conference. Resistance to arbitrary demands by the facilitator thus improperly becomes

a subjective measure of bad faith. Patterson’s conduct shows objectively that the

requirement of compromising from its last offer was fulfilled.

A Facilitator’s Insistence on a Specific Amount to Settle Is Improper

{40} Patterson stated its position of no liability in the “confidential position paper” it

submitted to Judge Currier, which the other parties also received. Patterson also made its

no-liability position clear at the outset of the conference and made no initial offer. Patterson

was therefore sanctioned for participating in the mediation when it had “no intent” to settle

and for misleading the other parties to believe there was “at least a possibility” of settlement.

Objectively, through its conduct, Patterson clearly abandoned acting on its intent, and that

intent is irrelevant. That Patterson’s offering $1000 “only after” being threatened with

sanctions should become the conclusive evidence of its bad faith is unjust. Patterson made

an offer and made its next offer contingent upon an assurance, rather than upon Judge

Currier’s belief that the amount would settle the case. Objectively, Patterson compromised,

and then it objectively demonstrated its willingness to compromise further. This is not bad

faith, and the majority substitute inchoate “intent” for objective acts on Patterson’s part to

justify the sanctions. I cannot concur with doing so when the facts are plainly before us.

{41} Court-annexed mandatory arbitration in New Mexico also requires good faith. One

writer suggests that good faith determinations rest upon requiring only that “[e]ach party

must be prepared to discuss his position on the issues presented by the case and to commit

the party to a particular position in the litigation but should not be required to make a

settlement offer or counteroffer.” William Lynch, Problems With Court-Annexed Mandatory
15

Arbitration: Illustrations From the New Mexico Experience, 32 N.M. L. Rev. 181, 203

(2002). The rationale for this view is that “[t]he parties must be assured that they can

forcefully argue their positions (i.e., that there is no liability, or that plaintiff’s claim is not

worth more than a certain sum) during the arbitration without the threat of sanctions being

imposed.” Id. at 199.

{42} Compromising from one’s previous position was contemplated by the parties to the

settlement conference as an integral part of the district court’s order. Under this standard,

an objective evaluation would inquire whether a party made a subsequent offer. Being

sanctioned for resisting when the facilitating judge demands a larger offer chills the rights

of each litigant to make its own determination as to whether a settlement is advantageous.

Insisting on another offer is an action that I must regard as exceeding the power of the judge

and abusing his discretion under the local rule and the district court’s order. The majority

do not address the question of whether a party has an absolute right to refuse to settle a claim

or whether exercising such refusal can be sanctioned. See Kamaunu v. Kaaea, 56 P.3d 734,

743 (Haw. Ct. App. 2002) (“We view with disfavor all pressure tactics whether directly or

obliquely, to coerce settlement by litigants and their counsel. Failure to concur in what the

[judge] presiding may consider an adequate settlement should not result in an imposition

upon a litigant or [litigant’s] counsel, who reject [sic] it, of any retributive sanctions not

specifically authorized by law.”). I believe a party has the right to refuse to settle.

{43} I also regard the facilitating judge’s imposition of a bad faith sanction for not

following his order to settle for a particular amount as outside the scope of LR5-205. This

local rule requires of the facilitating judge “a frank appraisal of the judge’s opinion of the

strengths and weaknesses of [each party’s] case, including the judge’s appraisal of the value

of the lawsuit.” LR5-205(H). After iterating along this line, LR5-205(J) first requires that

the judge address all parties with an “opinion” of the case and “a fair settlement” value and

then allows “[t]he parties . . . to confer with each other to see if an agreement can be

reached.” Thus, the rule authorizes the facilitating judge to say what the judge believes the

case is worth but leaves to the parties the decision on whether to agree. The facilitator is not

given the authority to impose a settlement value on the litigants using the lever of sanctions

for bad faith. The rule does not contemplate the facilitator ordering a party to make a larger

offer, and neither does the district court’s order. The order’s requirement of the parties was

no more than to “compromise from their last offer.”

{44} Patterson cites Dawson v. United States, 68 F.3d 886, 896 (5th Cir. 1995), in arguing

against the imposition of a good faith standard as a basis for sanctions. Dawson maintains

and Patterson argues that a district judge’s disagreement with the merits of a settlement

position asserted in good faith by a party cannot underlie an order imposing sanctions. Id.

Halaby, McCrea & Cross v. Hoffman, 831 P.2d 902, 908 (Colo.1992), held that the

“‘adequate’ amount of settlement authority will vary based on the circumstances of each

case, and a settlement conference judge should not impose sanctions because, in his opinion,

the amount is insufficient.” In Halaby, the Colorado Supreme Court granted a writ of

prohibition preventing the imposition of sanctions in a case such as this where the facilitator
16

imposed sanctions when the party’s offer of a minimal sum ended the settlement conference.

Id. at 904-05. The facilitator asserted positions almost identical to those in this case,

referring to the hours spent by the parties and the nominal amount of the offer. Id. Alas,

Patterson did not cite Halaby or Kamaunu.

{45} For us to uphold the sanction because the facilitator “acted within the parameters of

the rule and the order” ignores the fact that Patterson also fulfilled its obligation under the

order. It also ignores that the determination of bad faith is rooted in either Patterson’s

original intent not to settle, which Patterson obviously abandoned, or in no more than the

facilitator’s unsupported determination that the $1000 offer should have been increased by

$4000, with no assurance that he would impose his “opinion” of a settlement value similarly

on the other parties if they did not accept it. That is arbitrary behavior on the part of the

facilitator, and it is an abuse of the court’s discretion to sanction Patterson absent an

objective criterion upon which to place any faith in the dollar amounts demanded by the

facilitator.

{46} If such “active participation” of a facilitator is allowed, the facilitator must bear

some responsibility to demonstrate that any attempts to force a settlement are both

objectively reasonable and equally applied to all participants. Here, that would require the

facilitator to demonstrate in his findings that based on his representation of the sum’s

acceptability, and having insisted on an offer of $5000 from Patterson, that he similarly

insisted under threat of sanction that the Hotel accept that sum. Such a demonstration is not

made, and I would hold that the district court’s affirmance of the sanctions constitutes an

abuse of discretion equal to the facilitator’s.

The Facilitator Should Recuse From Judging His Own Sanction

{47} Last, empowering a facilitator to don a judge’s hat to rule on the propriety of his own

conduct is the essence of apparent impropriety and unfairness and should not be

countenanced. The district court’s subsequent independent review should have been more

skeptical.

A Strain on Judicial Efficiency

{48} Implementation of a rule such as LR5-205 with an order containing language as we

saw here creates problems for court efficiency and control of the docket. The majority point

out that this process has now been used in a second front of attack by Patterson’s opponents,

whose motions to sanction Patterson’s conduct in the conference succeeded. Using

subjective criteria to judge good or bad faith and then sanctioning a party as in this case

engenders this sort of “satellite litigation” that negatively impacts the district court’s claim

to promoting economy and efficiency through alternative dispute resolution. Edward F.

Sherman, Court-Mandated Alternative Dispute Resolution: What Form of Participation

Should Be Required? 46 SMU L. Rev. 2079, 2093 (1993). Further, the clear message is that

a party who believes it has no liability should not engage in a settlement conference under
17

a local rule or enabling order like this one, even if the possibility exists that such a party

would acquire enough information to justify changing its position.

RODERICK T. KENNEDY, Judge

Topic Index for Carlsbad Hotel Associates, LLC v. Patterson-UTI Drilling Co., No.

27,922

AE Appeal and Error

AE-SR Standard of Review

CP Civil Procedure

CP-SA Sanctions

CP-SE Settlements

JG Judges

JG-AD Abuse of Discretion

MS Miscellaneous Statutes

MS-ME Mediation Procedures Act